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On the conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market
journal contribution
posted on 2023-06-07, 22:01 authored by Ron Yiu-wah Ho, Roger StrangeRoger Strange, Jenifer PiesseUsing Hong Kong equity stock data, this study examines empirically the pricing effects of beta, firm size, and book-to-market equity, but conditional on market situations, i.e. whether the market is up or down. Evidence supports the hypothesis that, if the risk variable is priced by the market, then there exists a systematic but conditional relation between the risk variable and average return, and this relation takes on opposite directions during up and down markets. However, the significance of the relations is often affected by the changing values of the risk variables as a result of changes in market conditions. Specifically, it is found that all three risk variables, namely beta, size, and book-to-market equity, exhibit conditional pricing effects. This is the first comprehensive study of its kind on Hong Kong market, which provides out-of-sample evidence relative to earlier tests on US data. The findings give important insights into capital market behaviour, which should prove useful in investment management and corporate financial decisions.
History
Publication status
- Published
Journal
Journal of International Financial Markets, Institutions and MoneyISSN
1042-4431Publisher
ElsevierExternal DOI
Issue
3Volume
16Page range
199-214Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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